A £160m hit to Stormont’s budget next year will be dwarfed by a further £1.3bn worth of cuts looming on the horizon, the Northern Assembly has been warned.
Painting a stark picture of the state of Northern Ireland’s public finances for the rest of the decade, Finance Minister Simon Hamilton said the reductions proposed for 2015/16 are actually less than those estimated for the three following years.
Last week, the Executive voted by majority to accept a draft budget that will see a £160m real-terms cut (1.6%) from the annual £10bn resource budget.
Democratic Unionist minister Mr Hamilton told the Assembly that, extrapolating data from current estimates, another 13% cut will be made to the resource budget allocated to Northern Ireland over the period 2016-2019.
That would see around £1.3bn axed off the budget across those three years.
“Looking ahead, Office for Budget Responsibility projections show that we can expect our Resource DEL (Department Expenditure Limits) to fall by a further 13% in real terms by 2019,” said Mr Hamilton, as he outlined details of next year’s draft budget to the Assembly.
“So, in this year, and beyond, we will have a wide range of increasing demands placed upon our public services while we have fewer and fewer resources with which to meet that growing demand.”
He added: “This draft budget has been constructed in the most challenging financial circumstances to face any administration in the history of Northern Ireland. However, despite the multitude of challenges the Executive faces, we have agreed a draft budget that prioritises what is important to the people of Northern Ireland.”
The draft 2015/16 budget will see over £870m cut from certain public services in Northern Ireland, with around £710m reallocated to meet other spending pressures.
While the majority of departments lose out under the proposals, the health service is among a number of sectors that will see their funding increase.
If the power-sharing executive had failed to agree the provisional budget before the end of last week, the UK Government had warned ministers they would have forfeited a £100m emergency loan from the UK Treasury.
If the loan had not been secured, the administration would have bust its annual spending limit – a move that would have seen civil servants taking control of financial decisions next year.
The draft proposals received the backing of the Executive’s two largest parties - Sinn Féin and the DUP – but were opposed by the SDLP, with the Alliance Party and Ulster Unionists abstaining from voting.
Chancellor George Osborne set last Friday’s deadline to agree a draft budget for next year as a condition of allowing the Executive access to the £100m loan from the National Reserve to help ease a funding crisis in the current financial year.
Those problems were triggered, in part, by the need to absorb an £87m Treasury penalty for the Executive’s failure to implement the UK Government’s welfare reforms in the North.
The draft budget proposals do not factor in what is estimated to be a £114m penalty next year. They have instead been drawn up on the assumption that welfare reforms, in some form, will be introduced before next April and, as such, have set aside a £70m fund to help support those hardest hit by the changes to the benefits system.
If the DUP and Sinn Fein do not agree a deal on welfare reform then the 2015/16 budget will need to be revised.
In terms of repaying the £100m loan from the National Reserve, Mr Hamilton has asked the UK Treasury if the Executive can break with protocol and pay the money back from its capital budget, not its resource allocation. The Executive has already predicted bringing in around £108m in capital receipts next year through repaying loans and selling some assets.